Emerging Value in Energy Storage: Over 30,000 Companies Have Fallen, with Profitability Gaps Exceeding 50%
As of now, the energy storage industry has witnessed the collapse of more than 30,000 companies, and it is projected that over 60,000 additional energy storage enterprises may struggle to survive in the next three years. The new survival rule for the energy storage sector will undoubtedly shift from price competition to value creation.
The current state of the energy storage industry mirrors that of the photovoltaic sector, facing a crisis of price competition and entering a “death race.” Following the comprehensive policy rollout for renewable energy in February, many small and medium-sized energy storage companies are grappling with survival challenges as mandatory storage requirements come into effect. A popular saying in the market captures this predicament: “No matter how low your price, there is always someone willing to go lower.” For example, in January 2024, the average bid for a 2-hour large storage system was 0.93 CNY/Wh. By the end of 2024, prices for storage systems plummeted to approximately 0.445 CNY/Wh, effectively halving within a year, with further declines anticipated at the start of 2025.
Market reshuffling is intensifying among players in the energy storage arena. According to reports from Battery China CBEA, the number of companies in the energy storage supply chain has reached a staggering 290,000. Even more daunting is the fact that over 30,000 companies in this sector have already ceased operations (due to cancellations, suspensions, liquidations, etc.). Media outlets predict that if the closure rate of photovoltaic companies continues, more than 60,000 energy storage firms may not survive the next three years. Clearly, mere price competition lacks a sustainable future.
In the context of market-driven electricity pricing for new energy, the lifecycle cost per kilowatt-hour and revenue capability of energy storage systems have become the core indicators of competitiveness. Leading manufacturers like CATL and Envision Energy are pioneering technological breakthroughs and leveraging AI capabilities to enhance intelligent trading strategies. By actively participating in electricity markets, they can significantly boost owners’ revenues and establish a new energy storage ecosystem based on “value co-creation.”
1. Ceasing Mandatory Storage Requirements Opens Up Larger Market Space
The intention behind mandating energy storage for wind and solar projects was to smooth out fluctuations in renewable energy and enhance grid stability. However, in practice, this has turned into a competition for equipment rather than achieving the desired outcomes. The enforcement of mandatory storage has a distinct administrative command aspect, and its consequences are apparent. Firstly, the efficiency of storage utilization has been low. Renewable energy companies often add storage to meet project approval requirements, leading to many storage facilities being built but underutilized, with average utilization rates as low as 17%. Research in a western province indicates that storage systems are called upon only once every five days, resulting in significant resource waste.
Secondly, there is a cost-shifting trap. Mandatory storage has significantly increased construction costs for renewable energy projects. For instance, in a typical 100 MW wind-solar project, a 10% storage allocation (i.e., 10 MW/20 MWh) could incur costs ranging from 20 to 30 million CNY, costs that are often not recoverable through direct power generation revenues. Thirdly, this creates a reverse selection issue in bidding. Many view storage allocation merely as a means to secure renewable energy quotas, with little hope for actual regulation effects; thus, equipment contracts often go to the lowest bidders. This inefficient usage not only wastes resources but also leads to a market phenomenon where low-quality, low-cost storage devices frequently win bids while high-performance products are pushed out of the market. This “storage for storage’s sake” model generates nearly 10 billion CNY of ineffective investments annually and severely hinders advancements in storage technology.
The policy issued on February 9, titled “Notice on Deepening the Market-Oriented Reform of Renewable Energy Grid Pricing to Promote High-Quality Development of Renewable Energy,” has fundamentally altered this landscape. It explicitly states that “no unreasonable costs should be allocated to renewable energy, and energy storage configuration should not be a prerequisite for the approval, grid connection, or online operation of new renewable energy projects.” This loosening of policy signifies a shift from administrative mandates to market-based choices, empowering renewable energy owners to decide on storage configurations based on actual needs and economic benefits. While this change may seem to diminish the “mandatory status” of storage, it actually opens up more space for its development and intensifies industry differentiation.
The mandatory storage requirement previously accounted for a substantial share of the energy storage market, and its cessation could reduce demand by at least 50-60%. This shift will have a profound impact on energy storage equipment manufacturers who relied on low-quality, low-cost strategies to capture market share; they must adapt to the new transformation or face obsolescence. On the flip side, the new policy allows renewable power plants to flexibly select storage solutions according to their needs. This market-driven demand will push energy storage from “passive allocation” to “active selection,” with its core value transitioning from mere hardware costs to comprehensive revenue capabilities. In the future, energy storage stations can engage in various market trades, expanding revenue channels from the singular “capacity compensation” to over a dozen scenarios such as “peak-valley arbitrage” and “black-start services.” The new policy allows energy storage to return to its essence as “a tool for problem-solving” rather than being an accessory to power sources or grids.
2. Awakening New Value in Energy Storage
Historically, competition in the energy storage industry has primarily revolved around pricing. Manufacturers sought to capture market share by lowering equipment costs and sacrificing performance, leading to an influx of low-quality products. However, with the implementation of new policies and the deepening of market reforms, the competitive logic in the energy storage sector is undergoing a fundamental transformation—from price wars to value creation. Following the new policy, which states that “energy storage configuration cannot be a prerequisite for approval,” significant changes are emerging in the market.
Firstly, user-side energy storage is on the rise. The halt of mandatory energy storage for renewable energy sources and significant adjustments on the supply side will open up a new frontier for user-side configurations. In Jiangsu, the volume of user-side energy storage registrations grew by 300% year-over-year in 2024. One industrial park achieved “self-use during peak hours, charging during low times, and high-price electricity sales” through a “storage + photovoltaic” model, shortening the investment return period to 4.2 years—60% faster than the mandatory storage model. User-side energy storage, primarily driven by market forces, emerges as a promising growth segment.
Secondly, technical thresholds are rising. In the 2024 domestic energy storage tenders, 90% of projects explicitly require battery cycle life to be ≥1500 cycles. Leading companies like CATL, Envision Energy, and BYD are prioritized by owners due to their advantages in lifecycle cost (LCOS). Envision’s EnOS platform integrates meteorological, electrical, and market data to achieve integrated scheduling for energy storage stations, boasting an impressive bidding accuracy rate of 92% in Jiangsu’s spot market, far exceeding the industry average of 75%.
Thirdly, the premium for technological innovation is becoming more apparent. For instance, the 250 MW/500 MWh energy storage station in Sheyang, Jiangsu, has been performing exceptionally since its grid connection on July 12, setting several performance records. In terms of revenue, it has outperformed the average by approximately 11.7%, translating into an additional revenue of 21.3 million CNY over its lifecycle compared to similar storage products. During the peak summer season, the Sheyang station set a provincial revenue record, generating 40 million CNY in 40 days, with an average daily revenue exceeding one million CNY—30% higher than the average, surpassing the second-highest by 15%. By the end of 2024, the Sheyang station also participated in the sixth trial run of the Jiangsu spot market. In these trading scenarios, differing transaction capabilities will create significant revenue disparities. The Sheyang station actively participates in electricity spot trading using the EnOS platform, which integrates AI-driven trading to adapt to local market rules. With a more aggressive pricing strategy, it achieved 11.54 million CNY in revenue over a 14-day settlement period—54.2% above the average.
With policy relaxation, the market is now voting with real money. High-performance energy storage devices demonstrate clear advantages in charging and discharging efficiency, cycle life, and safety. Additionally, intelligent trading systems have become crucial variables in creating energy storage value. In the volatile and complex spot market, human operations struggle to pinpoint optimal trading moments. In contrast, AI-driven smart trading systems can analyze price trends, grid demand, and storage status in real-time, automatically optimizing bidding strategies. For example, the EnOS platform at the Sheyang station can dynamically adjust charging and discharging plans based on weather and electricity historical data, ensuring discharges at high prices and storage at low prices to maximize revenue. This “hardware + software” integrated solution is becoming a new benchmark in the energy storage industry.
3. Creating a Value-Coexisting Energy Storage Ecosystem
The process of “bad money driving out good” is, in fact, a natural selection and innovation upgrade within the market. When inefficient capacities and ineffective installations persist, it becomes challenging for high-quality capacities and efficient installations to emerge. From this perspective, the policy ceasing low-efficiency mandatory storage is compelling energy storage technology innovation and upgrading the efficiency and economics of installations, laying a foundation for the future high-quality development of energy storage.
Looking ahead, the greater value of energy storage should transition from standalone solutions to comprehensive solutions like “storage +,” constructing a new energy storage ecosystem based on “value coexistence.” For instance, integrated projects combining “photovoltaics (wind power) + storage + hydrogen production” are creating new models with evident economic benefits. However, the successful implementation of the new policy also requires the support of complementary policies. Issues such as establishing a complete energy storage revenue settlement mechanism, clarifying auxiliary service market rules, and promoting the nationwide rollout of electricity spot markets remain pressing challenges to address in the future. Moreover, the energy storage sector must collaborate with renewable energy generation companies, grid firms, and other stakeholders to build a healthy and sustainable industrial ecosystem. Only through the combined forces of policy, market dynamics, and technology can energy storage truly achieve the leap from “insufficient revenue” to “revenue redistribution.”
